Saturday, November 22, 2008

Summers to the NEC

Larry Summers is going to be director of the National Economic Council.

I wonder: What role will the Council of Economic Advisers have in the new Obama administration? And how will the CEA and NEC get along?

When I worked for President Bush as CEA chair, the NEC and CEA had distinct and complementary roles. The CEA was staffed by professional economists, many from academia, whose expertise was economic analysis. By contrast, the NEC was staffed by those with experience on Wall Street and Capitol Hill. The NEC's main role was to coordinate the policy process, to act as an honest broker, to make sure that all points of view were heard, and to facilitate discussion among the relevant departments so all felt they had a fair shot to make their case. Steve Friedman, formerly of Goldman Sachs, ran with NEC with impressive intelligence, humility, and diplomacy.

But the situation will likely be very different with Larry as head of the NEC, and perhaps Jason Furman as his deputy. Their skill set will overlap substantially with the three members of the CEA. In other words, the NEC and CEA will be more like substitutes than complements.

Only time will tell how well this alternative organizational structure will work.